General Motors To Pull Out Of India On Weak Market Share
This week, General Motors has made it clear that it wants to pull out of India. Multiple CEO changes and the financial crisis has limited its impact on the market in India. Competitors in India are making it hard for GM to penetrate the market.
Moving On
At the end of 2017, General Motors plans to stop selling its Chevrolet brand cars in India. Currently, the company hosts two production facilities in the country. The one plant, known as Talegon, will be kept open to export cars to Mexico and South America.
The Halol facility will be outright sold to a Chinese joint venture partner known as SAIC group. Why did General Motors had to go to such lengths in India? It is because it has been struggling to gain traction in market share. The company wanted desperately to succeed in this market.
That is because India is expected to become the third biggest auto market by this decade. General motors had big plans for many countries. For instance, it set up a plan to invest $5 billion dollars alongside its Chinese partner SAIC. It was to manufacture 2 million cars that were to be sold in: China, Mexico, South America, and India.
Well those plans fell apart when General motors had trouble penetrating the market in India. The goal was to obtain at least 3% of the market share there by 2020. The problem was that market share in that region has dropped to below 1% as of the year ending March 31. For now, moving away from the market in India might be the best option. That doesn’t rule out the ability for it to try again at a later time when the timing is right.
Multiple Problems
There were many factors for General Motors not being able to focus on the market in India. Some of those issues came way before the expansion plan was announced. Still, it had a negative effect on operations in India.
First of all, the company had gone through too many CEO changes. Over a 21 year period there were 9 different Chief Executive Officers. Each CEO lasted for about two and a half years on average. The problem with that is that too many CEO changes would have spoiled any expansion plans in India.
Secondly, the company had gone through a long period of recovery after the 2008 financial crisis. That is when it had to file for bankruptcy. Since then shareholders have demanded to see results. That kind of pressure was another item that may have pushed General Motors to rethink its strategy. That includes not pouring in billions of dollars in a market with small penetration such as India.
Competitors
As with anything in business, competing in a market requires going against a host of competitors. Such competitors include Hyundai and Maruti. Both of these car manufacturers have at least 65% of the market share in India. That’s a huge chunk of the market share, especially when you consider the fact that General Motors stood below 1% before pulling out.
That’s where the issue lies. In order for the company to stand a chance it had to spend a lot of cash to completely change its line. It had to produce compact cars that are more suitable for India. The lack of a huge selection pretty much paints the picture why market share never increased in the country for General Motors.
What Binary Options Traders Should Watch For
There are a few things that traders should watch. The first of which is how well auto sales in India perform by the end of 2017. While it won’t change General Motor’s decision to pull out, it will give an indication on any future plans to come back.
The second item would be if the company can keep the current CEO on board for a longer period of time. The multiple CEO changes has really hurt the company in maintaining its direction. This is especially true considering that it had to survive through a bankruptcy.
The final item that traders should keep an eye on would be if the competitors start to encroach on other territories that General Motors operates in. Competitors are important to watch because they are the ones that could potentially take both market share and revenues.
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